HRPT Advisors, Inc. v. MacDonald, Levine, Jenkins & Co., P.C.

• Decision Date: 09 October 1997
• Docket Number: No. 95-P-1989,95-P-1989
• Citation: 43 Mass.App.Ct. 613,686 N.E.2d 203
• Parties: HRPT ADVISORS, INC. v. MacDONALD, LEVINE, JENKINS & CO., P.C.
• Court: Appeals Court of Massachusetts

Page 203

686 N.E.2d 203

43 Mass.App.Ct. 613

HRPT ADVISORS, INC. v. MacDONALD, LEVINE, JENKINS & CO., P.C.

No. 95-P-1989.

Appeals Court of Massachusetts Suffolk.

Argued Nov. 13, 1996.

Decided Oct. 9, 1997.

Patrick P. Dinardo, Boston, for plaintiff.

Richard A. Goren, Framingham, for defendant.

Before SMITH, IRELAND and LENK, JJ. ¹

LENK, Justice.

The plaintiff, HRPT Advisors, Inc. (HRPT), owner of an office building in downtown Boston, brought this action against a certified public accounting firm, MacDonald, Levine, Jenkins & Co., P.C. (tenant), by complaint (as amended) seeking to recover rent due under a lease of a portion of the premises (count I) and, alternatively, an amount due for use and occupancy (count II). Initially, a Superior Court judge denied HRPT's motion for summary judgment, concluding that there were genuine issues of material fact present but nonetheless ruling that the lease at issue terminated by operation of law. On cross motions for summary judgment, a second judge denied HRPT's motion and allowed the tenant's motion as to count I for rent under the lease, and allowed HRPT's motion and denied the tenant's motion as to liability on count II for use and occupancy. A third judge awarded HRPT damages against the tenant for use and occupancy in the amount of $153,181.88. After entry of a final judgment, the parties cross-appealed.

We set forth the undisputed facts established on the summary judgment record, which includes a statement of agreed facts and various affidavits. On July 14, 1986, as security for payment of a promissory note, the trustees of 31 Milk Street Realty Trust, as owners of the office building located at 31 Milk Street in Boston (subject property), granted a mortgage on that property to a Boston bank. The mortgage provides, in pertinent part:

"The Mortgagor covenants:

" ...

"(8) ... faithfully to keep, observe and satisfy all the obligations on the part of the lessor to be kept, performed and satisfied under every lease from time to time in force with reference to the Property, ... and on the demand of the holder, to assign and deliver to the holder any or all such leases, or the rents and profits thereof, such assignments ... in all events to provide that the Mortgagor shall retain the rents and profits thereof until a default occurs in any covenant or condition in this Mortgage ..., and the holder shall have the right, by the execution of suitable written instruments from time to time to subordinate this Mortgage, and the rights of the holder hereunder, to any lease or leases from time to time in force with reference to the Property, and, on the execution of any such instrument, this Mortgage shall be subordinate to the lease for which such subordination is applicable with the same force and effect as if such lease had been executed and delivered, and a notice thereof recorded to the extent required to give notice to third persons, prior to the execution, delivery and recording of this Mortgage[.]"

As additional security for the mortgage loan, the trustees concurrently executed a "collateral assignment of leases and rents" (collateral assignment) providing for the assignment to the bank of the trustees' interest in any and all leases then in existence or subsequently entered into by the trustees, together with all rents arising from the leases. The collateral assignment provides, in pertinent part:

"Upon or at any time after a Default ... the Assignee ... may at its option ... take possession of the premises ... and have, hold, manage, lease and operate the same on such terms and for such period of time as the Assignee may deem proper, and either with or without taking possession of said premises or holding, managing, leasing and operating in its own name, demand, sue for or otherwise collect and receive all rents, income and profits of said premises, including those past due and unpaid...."

On July 25, 1988, the trustees, as lessor, and MacDonald, Levine, Savy & Co., P.C., ² as lessee, entered into a ten-year lease agreement (lease) regarding 5,305 square feet of office space (leased premises) on the second floor of the subject property. The lease rent was $10,941.56 per month for the first five years, $14,036.15 per month for years six through eight, and $14,478.23 per month for years eight and nine. The lease provides, in pertinent part:

"14.6 ASSIGNMENT OF RENTS AND TRANSFER OF TITLE. a) With reference to any assignment by Landlord of Landlord's interest in this Lease, or the rents payable hereunder, conditional in nature or otherwise, which assignment is made to the holder of a mortgage on property which includes the Premises, Tenant agrees that the execution thereof by Landlord, and the acceptance thereof by the holder of such mortgage shall never be treated as an assumption by such holder of any of the obligations of Landlord hereunder unless such holder shall, by notice sent to Tenant, specifically otherwise elect and that, except as aforesaid, such holder shall be treated as having assumed Landlord's obligations hereunder only upon foreclosure of such holder's mortgage and the taking of possession of the Premises.

"...

"14.10 PROVISIONS BINDING, ETC. Except as herein otherwise provided, the terms hereof shall be binding upon and shall inure to the benefit of the successors and assigns, respectively, of Landlord and Tenant (except in the case of Tenant, only such assigns as may be permitted hereunder)....

"...

"14.15 RIGHTS OF MORTGAGEE OR GROUND LESSOR. This Lease shall be subordinate to any mortgage ... from time to time encumbering the Premises, whether executed and delivered prior to or subsequent to the date of this Lease, if the holder of such mortgage ... shall so elect.... If this Lease is subordinate to any mortgage ... and the holder thereof (or successor) shall succeed to the interest of Landlord, at the election of such holder (or successor) Tenant shall attorn to such holder and this Lease shall continue in full force and effect between such holder (or successor) and Tenant. Tenant agrees to execute such instruments of subordination or attornment in confirmation of the foregoing agreement as such holder may request, and Tenant hereby appoints such holder as Tenant's attorney-in-fact to execute such subordination or attornment agreement upon default of Tenant in complying with such holder's request."

The trustees defaulted on their obligations to the bank and, on July 25, 1991, the bank made entry on the subject property for purposes of foreclosure. ³ Also on July 25, the bank delivered to the tenant a written notice stating that the bank was the holder of the mortgage note referenced in the collateral assignment and that the trustees were in default under the collateral assignment, and directing the tenant to make all rental payments under the lease to the bank. ⁴ At that time, the tenant owed no arrearage under the lease.

The tenant, giving notice that it refused to recognize the bank as its landlord, responded that the bank could not enforce the lease as mortgagee in possession and asserted that the bank's entry under the mortgage and its demand for rent terminated the lease. The tenant expressed a willingness to negotiate a new lease, but the bank refused, insisting that any rent tendered would be applied to rent due under the existing lease. As early as August, 1991, and at times thereafter, the bank or its agent advised the tenant that the bank could enforce the lease, and that the bank would take legal action seeking damages and eviction if the tenant refused to honor the lease. Beginning in September, 1991, and continuing each month thereafter through June, 1992, the bank's managing agent issued invoices to the tenant claiming rent due under the lease, but the tenant made no payments.

On February 14, 1992, the bank, "with a reservation of its rights under the existing Lease and under applicable law," made demand upon the tenant for all past due arrearages under the lease, and gave the tenant written notice that it had scheduled a foreclosure sale of the subject property for February 25, 1992. This notice provides, in pertinent part:

"In accordance with your lease (the 'Lease') arrangement with the Landlord, the Bank hereby notifies you that if and when the foreclosure sale is consummated, and in the event that the Bank is the successful purchaser of the mortgaged premises at the aforesaid foreclosure sale, your Lease shall not be extinguished by the Bank's foreclosure sale and the Bank shall require that you attorn to the Bank or its successor such that your Lease shall continue in full force and effect."

By instrument executed and recorded one day before the foreclosure sale, the bank, as holder of the mortgage from the trustees, subordinated the mortgage "to the leases presently existing with respect to the Premises ... with the same effect as if the Leases had been executed, delivered and recorded prior to the ... [m]ortgage." The bank purchased the subject property at the foreclosure sale, subsequently transferring title to a wholly owned subsidiary and assigning the lease to the subsidiary. ⁵ In June, 1992, the subsidiary conveyed the subject property to HRPT and assigned the lease to HRPT. ⁶ HRPT informed the tenant that HRPT had purchased the building and that the tenant should pay rent to HRPT. The tenant made no rental payments under the lease and this litigation ensued. ⁷

"Summary judgment is appropriate where the 'pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' " Highlands Ins. Co. v. Aerovox Inc., 424 Mass. 226, 232, 676 N.E.2d 801 (1997), quoting Mass.R.Civ.P. 56(c), 365 Mass. 824 (1974).

1. Applicability of the doctrine of paramount title. In allowing summary judgment for the tenant on HRPT's claim for...